Interest Expenses and Commercial Expediency Test

Interest expenses and Commercial Expediency Test Prof. HLA Hart famously stated that 'whichever device, precedent or legislation, is chosen for the communication of standards of behavior, these, however smoothly they work over the great mass of ordinary cases, will, at some point where their application is in question, prove indeterminate; they will have what has been termed an open texture.' 1 Hart borrowed the concept of open texture from Friedrich Waismann who went even further to state that even the most precise and carefully delimited empirical terms might nevertheless produce uncertainty in the face of unforeseen and virtually unimaginable instances. Because language cannot anticipate all possible occurrences in all possible worlds, he argued, there persists the ineliminable potential that a definition of an empirical concept bounded in all now-foreseeable dimensions can break down in the face of unforeseen and unforeseeable events because of language. 2 Even the words that seemingly, at first sight, have no ambiguities or vagueness might offer differing interpretations. This article focuses on one such instance-the phrase, 'incurred in the production of income from the business or investment', used in section 14 (1) of the Income Tax Act, 2058-which has puzzled tax payers and tax officers and has much judicial ink poured over it. This will be analyzed in light of few cases decided by the Supreme Court of Nepal and few leading cases from U.K. and India on onlending arrangements.